Editorial comment

Reports of my death have been greatly exaggerated”: so goes the popular misquote of Mark Twain, correcting newspaper reports of his recent demise. The coal industry may be forgiven a similar reaction this month, after the US Environmental Protection Agency (EPA) announced tough new emissions standards for new-build coal-fired power plants. Obituaries of the coal industry were quick to follow: those from the environmental lobby with no small amount of glee; all overstating the terminal nature of coal’s current weakness.

It is certainly true that – to quote another great of US literature – times, they are a-changing. Across the world, the industry is facing uncertainty. China, the country whose coal demand was supposed to keep the boom times rolling for years to come, is talking about limiting its reliance on coal, including stopping the construction of new coal-fired power plants in the populous coastal regions and toying with the idea of a national carbon trading scheme. The rise in China’s domestic coal production also looks like it could slow the country’s appetite for coal imports, as could a limit on the import of low-quality coal.

Elsewhere, India is grappling with political and economic challenges that seem unlikely to be resolved before elections next year, while Australia – fresh from its own elections – looks set for a battle between the new prime minister, Tony Abbott, and the Senate over repealing the carbon and mining taxes. Industrial action has hit the industry in Colombia and South Africa this year; resource nationalism is a worrying trend in Mongolia and Indonesia; and logistical challenges are making it much harder and more expensive than originally expected to develop Mozambique’s vast coal resources.

But uncertainty should not be mistaken for imminent demise. Consider these forecasts from a range of sources:

In its Medium-Term Coal Market Report 2012, the International Energy Agency (IEA) predicted coal’s share of the global energy mix would come close to surpassing oil as the world’s top energy source. The world will burn about 1.7 billion t more coal in 2017 than in 2012 – more than the current annual coal consumption in the US and Russia combined.

PricewaterhouseCoopers recently argued that, as China’s future demand for commodities will be coming from a much larger base, although in percentage terms it may be lower, in absolute volume terms its will still rise. Indeed, in the IEA’s predictions, even if Chinese economic growth slows to an average of 4.6% in the years to 2017, coal demand would still increase both globally and in China.

In The Economist Intelligence Unit’s forecasts for the ten largest coal consuming regions, coal consumption falls in only two between now and 2015: the US and the EU. By 2020, coal’s share of gross domestic energy consumption remains above a third in five of the top ten regions: China, India, South Africa, Australia and Turkey.

Finally in Europe, new analysis from Thomson Reuters Point Carbon suggests that a prolonged period of surplus carbon credits on the EU’s Emissions Trading Scheme could keep the continent’s coal renaissance going longer than expected.

There is no doubt that these are difficult times – a consequence of long-term demand shifts pushed on by the shale gas revolution in the US (the real reason behind the drop in US coal consumption). New environmental regulation could cement these changes and move the coal industry even further east. But here it will thrive for the foreseeable future. The king is not dead yet.